Could Tim Hortons Inc. help Burger King wake up in the mornings?
There are plenty of reasons the Miami chain wants to buy the Canadian coffee concept. Taxes might be one (or maybe not). International development is certainly another. And it could give Tim Hortons a lift in the U.S., where it has historically struggled.
But it could also give Burger King a lift in what is quickly becoming the most important meal of the day in the restaurant industry: Breakfast. That's the daypart where Burger King is weakest. It is also, not coincidentally, the daypart where Tim Hortons thrives.
"Tim Hortons is breakfast," said Douglas Fisher, president of FHG International, a foodservice consulting firm based in Toronto. We spoke with Fisher for an upcoming piece in NRN on the potential impact of the deal on Tim Hortons, but he also provided excellent insight on its potential for Burger King. "It could be a great matchup."
Make no mistake, breakfast is important. It is the only daypart actively adding customers right now. According to NPD Group, traffic at restaurants in the morning increased 3 percent last year, even while restaurant traffic fell for the industry overall.
Burger King's nemesis, McDonald's Corp., is a behemoth in the morning and actually added breakfast sales in the third quarter even while its own sales fell. Taco Bell added breakfast this year. There are a growing number of family dining chains that specialize in breakfast and shut their doors at 2 p.m. Indeed, Dunkin' Brands this morning cited this mounting competition in the mornings as it predicted that sales will likely miss expectations this year.
Fisher speculated that adding Tim Hortons would enable Burger King to start an in-store coffee shop business, similar to McDonald's McCafe. Tim Hortons' manufacturing and distribution network enables the company to put a store just about anywhere. "It's next to impossible to think that Burger King isn't going to do a McCafe-type program," Fisher said. Such a program, he said, would add a substantial amount to franchisees' bottom lines, if it's done right.
That would be a boon for Tim Hortons, too. Burger King has more than 7,400 locations in the U.S. and Canada, and about 14,000 worldwide. That's much bigger than Tim Hortons' 4,500 locations. "If Burger King switches from Seattle's Best Coffee to Tim Hortons, Tim Hortons would triple, almost quadruple its coffee production overnight," Fisher said.
To be sure, Tim Hortons hasn't exactly thrived in the U.S., where it is more of a regional brand and has half of the unit volumes that it enjoys in Canada. So there's no guarantee that changing the coffee brand in Burger King restaurants to Tim Hortons would lure many customers, especially in the South and West where the name is not well known. And, as Dunkin CEO Nigel Travis said this morning, breakfast is really competitive right now.
Still, at the very least, Tim Hortons would show Burger King how to operate in the morning daypart, something the burger chain has consistently struggled to do.